10-QPeriod: Q2 FY2017

PEPSICO INC Quarterly Report for Q2 Ended Jun 17, 2017

Filed July 11, 2017For Securities:PEP

Summary

PepsiCo Inc.'s (PEP) second quarter of 2017 filing shows steady revenue growth, with net revenue increasing by 2% to $15.7 billion for the 12-week period and $27.8 billion for the 24-week period, compared to the prior year. Diluted earnings per share (EPS) also saw a healthy increase, rising by 6% to $1.46 for the 12-week period and by 18% to $2.38 for the 24-week period. The company's operating profit experienced growth across most segments, with notable increases in Europe Sub-Saharan Africa (ESSA) and Asia, Middle East and North Africa (AMENA), partly driven by strategic initiatives and a gain from the sale of a minority stake in Britvic. The company continued its productivity initiatives, incurring restructuring charges but also realizing cost savings. Despite some headwinds from commodity cost inflation and unfavorable foreign exchange, particularly in AMENA and Latin America, PepsiCo demonstrated resilience through effective net pricing and cost management. The company also reaffirmed its commitment to returning capital to shareholders, announcing a 7.0% increase in its annualized dividend and expecting to return approximately $6.5 billion in 2017 through dividends and share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$15.71B

55.1% Gross Margin

Net Income

$2.10B

13.4% Net Margin

EPS (Diluted)

$1.46

Total Assets

$76.94B

Cash & Equivalents

$10.30B

Free Cash Flow

$2.44B

Financial Statements
Beta
Revenue$15.71B
Cost of Revenue$7.06B
Gross Profit$8.65B
SG&A Expenses$5.73B
Operating Income$2.92B
Interest Expense$265.00M
Net Income$2.10B
EPS (Basic)$1.47
EPS (Diluted)$1.46
Shares Outstanding (Basic)1.43B
Shares Outstanding (Diluted)1.44B

Key Highlights

  • 1Net revenue increased by 2% to $15.71 billion for the 12 weeks ended June 17, 2017, and by 2% to $27.76 billion for the 24 weeks ended June 17, 2017.
  • 2Diluted EPS rose by 6% to $1.46 for the 12-week period and by 18% to $2.38 for the 24-week period.
  • 3Operating profit for the 12-week period increased by 1% to $2.99 billion, and by 7% to $4.92 billion for the 24-week period.
  • 4ESSA and AMENA segments showed significant operating profit growth (49% and 104% respectively for 24 weeks), partly due to a gain from the Britvic stake sale and a prior year impairment charge reversal.
  • 5The company announced a 7.0% increase in its annualized dividend to $3.22 per share.
  • 6Free cash flow for the 24-week period was $1.39 billion, a decrease of 38% from the prior year, largely due to working capital changes.
  • 7Share repurchases totaled $0.94 billion and $2.18 billion in dividends were paid during the 24-week period.

Frequently Asked Questions

PepsiCo reported a 2% increase in net revenue for both the 12-week and 24-week periods ended June 17, 2017, reaching $15.71 billion and $27.76 billion, respectively. This growth was driven by effective net pricing and volume increases in some segments, partially offset by unfavorable foreign exchange and volume declines in others.

PepsiCo incurred restructuring charges related to its multi-year productivity plan, with $34 million for the 12-week period and $61 million for the 24-week period. While these charges impacted expenses, the company indicated that planned cost reductions across various expense categories contributed positively to operating profit growth.

PepsiCo announced a 7.0% increase in its annualized dividend to $3.22 per share and expects to return approximately $6.5 billion to shareholders in 2017 through dividends and share repurchases. The company also continues to utilize debt financing, with net proceeds from long-term debt partially offsetting cash used for financing activities.

The substantial operating profit increases in the ESSA (49%) and AMENA (104%) segments for the 24-week period were influenced by several factors. For ESSA, a gain from the sale of a minority stake in Britvic contributed significantly. For AMENA, the increase was primarily due to the reversal of a substantial impairment charge recorded in the prior year related to an investment in Tingyi-Asahi Beverages Holding Co. Ltd. Both segments also benefited from effective net pricing and cost reductions.